Main points of investment
High-quality private general contractor, with high technical barriers: the company's main three major plates: reservoir, drilling, well completion. Since its establishment in 1998, the company has gradually made a reputation in Xinjiang, Sichuan and Central Asia, especially in the difficult "three high wells". In 2011, in the southwest area of Petrochina Company Limited, the company adopted the first drilling fluid technology to solve special well conditions, which was unanimously recognized. In addition, the company has set up R & D centers in Canada, Singapore and Tianjin respectively, and has strong technical barriers in downhole electronic pressure. It is a high-quality private oil service general contract enterprise with strong domestic technical strength.
In 2018, the company reported improved performance, and profitability rebounded significantly: the company's 2018H1 revenue was 541 million yuan, an increase of 29.1% over the same period last year, of which 42%, 41% and 17% were revenue from reservoir, drilling and completion operations, respectively. The net profit was 20 million yuan, making a smooth turnaround from losses to profits. 2018H1's EBITDAMargin is as high as 23.1%, showing a good profit improvement. With the rise in the volume and price of engineering operations brought about by the recovery of the industry, as well as the reduction in costs brought about by the improvement in the efficiency of engineering operations, the company is expected to usher in high performance growth.
Petrochina Company Limited sends a clear signal to increase production, and the company expects to fully benefit: according to the data disclosed by Petrochina Company Limited, there is still a large gap between its rock gas production of 4.26 billion m3 in 2018 and the target of 12 billion m3 in 2020, and it is expected that the shale gas production process will be accelerated from 2019 to 2020. There is also a large demand for increased production of conventional natural gas. Accordingly, Petrochina Company Limited made clear the strategy of increasing production at the working meeting at the beginning of 2019, announcing that the domestic exploration and development investment operation plan in 2019 would increase by 25% compared with the same period last year, of which the risk exploration investment increased by four times, and the signal of increasing production was clear. And Petrochina Company Limited, as the company's largest downstream customer, there is a relatively obvious positive correlation between its capital expenditure and the company's income. We believe that the company fully hopes to benefit from the increase in capital expenditure brought about by Petrochina Company Limited's speed-up and unconventional development. superimposed by the steady development of overseas markets, the performance of this round of high business cycle is expected to break through the highs of the previous round.
The four major business blocks work together: 2018H1's domestic revenue is 322 million yuan, accounting for nearly 60%, and overseas income is 218 million yuan, accounting for about 40%. Four major business areas: (1) Tarim: after the 13th five-year Plan, Petrochina Company Limited will invest 150 billion yuan in Xinjiang, and 5 million tons of oil and gas production capacity will be concentrated in the last three years. (2) Sichuan: benefiting from Petrochina Company Limited's target of continuous production of unconventional gas, 14 wells have been ordered by Q3 in 2018, and the platform operation volume is expected to continue to increase in 2019. (3) Kazakhstan: the rebound in oil prices has led to an increase in capital expenditure of oil companies, and the size of orders between companies and Kazakhstan is expected to return to an all-time high. (4) Turkmenistan: 30 billion cubic meters of natural gas pipeline construction 2020 is expected to be completed, driving the company's performance growth.
Profit forecast and investment rating: the company's 2018H1 performance has bottomed out and rebounded. At present, orders have rebounded significantly, revenue and gross profit margin have increased significantly, and EPS is expected to continue to improve; on the other hand, the state has vigorously promoted unconventional production of oil and gas resources, and with the decline of production costs and economic benefits, the willingness to exploit oil and gas spontaneously has increased, and the valuation level is also expected to continue to improve. We believe that the company is expected to usher in performance and valuation of Davis double-click. It is estimated that the revenue from 2018-2020 is 1.6207max 2.42 billion yuan, and the net profit of return to the mother is 0.95 million RMB 19.0 billion, corresponding to PE 9-5-3 X, the first coverage, given a "buy" rating. (the exchange rate of the Hong Kong dollar is calculated at 0.8552 on 2019-3-12)
Risk hint: the capital expenditure of domestic oil companies is not as strong as expected, and the construction progress of the project is not as expected.
